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the realty sector is concerned that back-to-back rate hikes will impact housing sales.

MUMBAI :Loan instalments are set to rise for the third time in four months, following the Reserve Bank of India’s (RBI) Friday decision to hike the policy repo rate by another 50 basis points (bps) to 5.4%.

While the hike would immediately impact floating rate loans linked to external benchmarks like the repo, those pegged to other benchmarks would follow soon after. Under RBI regulations, banks are supposed to reset the interest rate on loans linked to external benchmarks at least once every three months.

New loans on the repo-linked benchmark would see the impact of the rate hike from the next due date for equated monthly instalments (EMIs). Loans linked to the marginal cost of funds-based lending rate (MCLR) – an internal benchmark – will take a bit longer to reprice. Banks benchmark retail and small business loans to external rates, while most corporate loans are pegged to their MCLRs. With Friday’s hike, interest rates are up by a cumulative 140 basis points since May.

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